The Age Lottery
There's two parts to this blog, as Sven might have said "first half not so good, second half better". Both parts relate to the lottery people are facing of different pension rules depending on how old they are - or rather when they were a specific age, be it over 75 or age 50 - 55.
For those aged 75 or over, our Newsletter last week reported that the abolition of the age 75 rule was good news, but there was no news on what the options would be for those currently over 75 who are in ASP. We had barely hit the Send button when we read reports that HMRC are saying that the new rules will not benefit these people, they have to remain in ASP (or buy an annuity or switch to a Scheme Pension).
The explanation seems to be in the wording, USP is Unsecured, ASP is Secured so anyone in ASP has already secured their pension and that's tough luck (though from where I'm sitting both look like income drawdown to me, so what's the difference?). If this is correct, someone reaching age 75 on 22 June 2010 has a lot more flexibility than someone who was 75 the day before. I guess it was worse at A Day, someone who was 75 on 5 April 2006 had to buy an annuity. It's still a lottery though.
None of this is set in stone yet, but it's got me thinking that there could still be life in the Scheme Pension option. Anyone who was 75 between 6 April 2006 and 22 June 2010 (which must be quite a few people) could still benefit from Scheme Pension as an alternative to the drawbacks of ASP. Now that HMRC have confirmed that Scheme Pension is definitely OK in SIPPs and SSASs, it could have more widespread appeal for these people. We need to wait for more clarity on the new rules.
The second part of the age lottery is for those aged 50 - 55, where common sense has prevailed. HMRC have just issued an announcement confirming that they will introduce legislation, backdated to 6 April 2010, to allow people in this category who have crystallised benefits to transfer and carry on drawing pension in the new scheme without penal taxes applying. Moreover, HMRC have said that it is OK to take action in line with this announcement before the new rules are finalised.
I can't quite believe I've just written the above paragraph - common sense, removal of an anomaly in the rules, OK to take action based on an HMRC announcement - most of my pension career has been under 13 years of Gordon Brown where such things just didn't happen. Let's hope we can get some simplicity and common sense round the age 75 position as well.
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